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Intangible Capital and Productivity Growth in Canada

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  • Macdonald, Ryan
  • Gu, Wulong
  • Baldwin, John R.

Abstract

Intangible capital consists of investments that do not take on the solid, physical characteristics of machinery and equipment or buildings. Nevertheless, such investments have some of the properties of other types of investments in that they yield long-lasting benefits as a result of expenditures that are made today. In the National Accounts, these expenditures need to be capitalized rather than expensed as intermediate materials for purposes of estimating gross domestic product (GDP). Recent papers have considered issues surrounding the measurement of intangibles. Baldwin et al. (2005) discussed issues surrounding research and development (R&D). They noted that R&D is only one of the components of innovation expenditures. Baldwin et al. (2009) extended the measurement of intangible investments beyond that of just R&D. At the heart of intangible investments, of course, are software and R&D. However, intangible investments also consist of purchased science services, own-account scientific services, exploration expenses in the resource sector, and advertising expenditures, because these create an intangible asset and yield long-term benefits. This paper extends the authors' previous work in three ways. First, it expands it into several new areas--what are referred to as economic competencies. These involve primarily investments in human capital--via management and training investments as well as management consulting services. This not only provides broader coverage; it also allows cross-country comparisons of Canada to the United States. Second, this paper moves from just measuring investment to also developing capital stock estimates. This requires assumptions about depreciation rates. In both instances, the paper adopts assumptions similar to those used elsewhere in developing estimates for the United States, in order to ensure comparability. Third, the paper incorporates the estimates of intangible capital into the growth-accounting framework so as to understand how it is related to productivity growth. A comparison of Canada and the United States in this regard is also provided.

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Bibliographic Info

Paper provided by Statistics Canada, Economic Analysis in its series The Canadian Productivity Review with number 2012029e.

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Date of creation: 01 Jun 2012
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Handle: RePEc:stc:stcp6e:2012029e

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Web page: http://www.statcan.gc.ca
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Keywords: Economic accounts; Gross domestic product; Productivity accounts;

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Cited by:
  1. Amani Elnasri & Kevin J. Fox, 2014. "The Contribution of Research and Innovation to Productivity and Economic Growth," Discussion Papers 2014-08, School of Economics, The University of New South Wales.
  2. Niebel, Thomas & O'Mahony, Mary & Saam, Marianne, 2013. "The contribution of intangible assets to sectoral productivity growth in the EU," ZEW Discussion Papers 13-062, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Wulong Gu, 2012. "Estimating Capital Input for Measuring Business Sector Multifactor Productivity Growth in Canada: Response to Diewert and Yu," International Productivity Monitor, Centre for the Study of Living Standards, vol. 24, pages 49-62, Fall.

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